Experts Seek Enforcement of Standards in Downstream Oil Sector

Peter Uzoho 

Energy experts have stressed the need for the regulatory agencies in the downstream oil sector to up their game in the enforcement of standard market practices to encourage fair competition.

They stated this during an interactive session in Lagos, which  centred on the future of the Nigerian oil and gas industry

Speaking at the event, Chief Executive Officer of AHA Consultancies, Mr. Ademola Adigun, said the promotion of competition or a market-driven petroleum industry in Nigeria was essential to attracting the needed investments across the oil and gas value chain. 

By law, he argued that the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and the Federal Competition and Consumer Protection Commission (FCCPC) are supposed to be active in monitoring the market to avoid any anti-competitive behaviour.

Adigun acknowledged the impact of Dangote Refinery on not only Nigerian but across the African and world petroleum refining and supply landscape, saying the 650,000 barrels per day refinery has launched Nigeria to the world as a refining powerhouse.

Adigun mentioned that Dangote Refinery now competes strongly with major refineries across the world owing to its size, technological innovation, and its product quality, which is now within the approved 50 Pass Per Million (PPM).

The expert noted that Dangote’s products are even cheaper in price than its competitors across the world, attributing the feat to several factors including the falling oil prices, the naira-for-crude initiative, and the company’s efficiency driven by innovation.

He argued that at the moment, Dangote does not have a major competitor in Nigeria as the Nigerian National Petroleum Company Limited (NNPC)’s refineries have far lower output capacity and quality compared to the $20 billion Lagos-based refinery.

This, he explained, makes it more difficult for the Nigerian government to attempt to ban importation of fuels into the country, as that may lead to a monopoly and several anti-market practices which are not good for any market.

 “Dangote is instead competing with big refineries across the world. So, it’s only when Nigeria has more refineries of Dangote size that it will make more sense to stop importation of fuels”, Adigun stated. 

Consultant at the Institute for Energy and Extractive Industry Law, Dr Taiwo Ogunleye, who spoke on ‘Understanding Anti-competitive Practices in the Midstream and Downstream Petroleum Industry,’ argued that lack of competitive market leads to a single player determining the price of products.

He said such practice must be checked by the regulators in order to boost investments in the sector and protect all players and consumers in the business.

Ogunleye explained: “Anti-competitive market practices and behaviour in the midstream and downstream petroleum industry are activities performed by companies to undermine fair competition, negatively impacting market efficiency, prices, and consumer choices. 

“Such practices may include price fixing, collusion, predatory pricing, market allocation, monopolization or abuse of dominance, exclusive contracts, unfair restrictions in distribution and retail operations, refusal to supply or deal, discrimination in pricing, or limiting infrastructure access to competitors.

“These behaviours distort market conditions, creating artificial barriers for new entrants or smaller players, undermining transparency in the pricing process, harming consumer welfare, and hindering innovation and improvements in service quality.”